Preventing tax advantages through connected party debt

Individuals who fund a connected company with debt, either directly or through a partnership (including private equity LPs), will no longer be entitled to a reduction in their taxable earnings where the company suffers a transfer pricing charge relating to the interest on that debt.

In addition, the individuals concerned will be taxed as if they had received a dividend equal to the ‘excess’ interest.

HM Revenue & Customs has published draft legislation, taking effect from 25 October 2013, to prevent the perceived abuse of the transfer pricing ‘compensating adjustment’ rules…

If you are registered and logged in to the site, click on the link below to read the rest of the Mills & Reeve briefing. If not, please register or sign in with your details below.